12/22/20

None of the following is investment advice. And while I don’t like to forecast, I break that law slightly in this memo.

Happy holidays to you all. More importantly, happy new year. There are few words that can describe 2020, but we all felt it together, and I think there’s power in that. As far as I’m concerned, 2020 was the best thing to happen to mankind for centuries.

Art History has been my focus since late October. I picked up Marilyn Stokstad’s “Art History” and now am about 60% through the 1200 page thriller of a textbook. Don’t ask me why I was drawn to art history over other forms of history, I have no good answer. This memo today will draw extensively from what trends I have concluded to try and explain some of what’s going on lately. Therefore, this memo will probably be largely shortsighted and imprecise. But in consolation, my favorite trend in art has been that understanding over time leads to improved intuition and a palpable forgiveness for such imprecision. Think of this memo as more of an abstract piece, and I can make no apologies for it – it is an art piece in itself :). My goal is to make you, the reader, a better investor. History doesn’t repeat, but it does rhyme.

Buffett himself used to shun micromanaging clients by saying something to the extent that investing is his medium and he would never be done perfecting his work. Buffett was extreme in his reticence – you really had to read between the lines with Buffett, and even then it was impossible to replicate what he did. His art was a different generation altogether, where the internet was yet to dominate society, information was scarcer than today, and insurance had lower barriers to entry. For those reasons, there can never again be a Buffett, but there will be other investors that ‘rhyme’ with him.

Ok, you get it.

Let’s get some major trends out of the way

Egypt is credited with creating the first organized class system, with the wealthy families and slaves that served those families, in life and in death. This trend is still true today, more pronounced in emerging economies.

Compared to today, life was an epic struggle until the Renaissance, with little in the way of the arts and entertainment in general. In many ways, those pre-renaissance people were smarter than we are today because both a lack of direction and standard of living forced them away from a comfort zone constantly. The people that move society most are those that struggle the most.

Moreover, advancements in society will always be more important than smaller day-to-day tasks within society. Those people that move society struggle to see a big picture and then struggle to make that picture manifest into reality. Those ideas are often not acceptable to other citizens that can’t think on those levels. Also, governments should focus large efforts on advancing society, rather than serving their own interests.

Humans gave themselves greater perception and had greater confidence over time, with growth in society nearly directly correlating to the sophistication with which man was painted/sculpted.

Art often revolved around religion and Gods, which quite obviously were representations of the wealthy. This trend is perhaps most important, since it shows how society appreciates those people who struggle to advance society, and that art was a common link among all classes. Art allows everyone to feel like a sophisticated human, almost godlike.

Large families were a means to an end, where there was much to do with little efficiency. In early American settlement, it was common for a family to have a dozen children, because the colonists needed help maintaining land and the advancement they so correctly prophesied.

Warfare was and is a means to an end, where the end could be fame and fortune for the winning commander or a massive distribution of poverty from the lower classes. The latter led to the end of Ancient Greece. No war hero or contentious period has sustained power, concluding that it truly is better to ‘make love, not war’. I’d prefer ‘make art, not war’…

Money is a symbol of power, and is, in the end, solely used to advance mankind. Any chance to get further for mankind is a great (and only) use of money. Money is used by shortsighted governments often to corrupt society and stifle growth in favor of excessive power (Venezuela, Nigeria). Living in a society where you know you are oppressed seems like slavery, and that concept should not exist in a society moving forward. There should be every effort toward putting all people on the same plane, including redefining what money is and how it’s created.

Centers of society always carried the best artwork. Nowhere was this more true than in Gothic and pre-renaissance Europe, with churches being those places of refuge from the struggle of everyday life. Until Martin Luther, churches were stuck in a loop of –

1. Struggle outside the church (like the Plague) brought people in the church,
2. Those people tithed
3. Tithings were reinvested into more churches and more opulence. Artists focused majorly on religion, and reached stardom if works were featured prominently.
4. More people came into church to participate in great art.

This leads us to the next part of the memo – what is religion today? Religion has been used to motivate mankind toward advancement, among other things. It has also promised refuge, sophistication, fame and fortune from the beginning of humankind. Religion has changed dramatically, with different societies adopting radically different religions, but they mostly do ‘rhyme’.

Brace yourself for what I’m about to say.

I believe internet is our newest religion.

Kings are dead. Churches are the past. War is dead. Large families are unnecessary. Standards of Living are gaining quickly.

So everything I see in the future is revolving around machines and the internet that connects us all. We are still in the early days of internet acceptance. Internet has all those things – sophistication, fortune and fame, and refuge. It is also less expensive and more efficient than any other religion in the past. Is it any wonder that the final chapter of Stokstad’s “Art History” covers Playstation graphics as an art form? It is truly the future of everything.

Never have these ideas been more commonly accepted than in 2020.

In October, I mistakenly said that Bitcoin would gain in acceptance because it is decentralized and not dependent on governments. This is true, but not what intrinsically calls on humankind as salvation. And yes, Bitcoin is a salvation. It is the money of the internet. It isn’t money, but it is. At once, it strips corrupt governments of enslaving people and allowing everyone to have a SINGULAR currency. I see Bitcoin as obviously the future of money, and I could see a coin eclipsing $500,000 one day. These are the intrinsic values of Bitcoin.

The dollar must be sacrificed to bring mankind through the current crisis. If not, the system remains at risk for years, if not permanently. Bitcoin and stocks are both priced in the US Dollar, meaning that rises in Bitcoin (or stocks) has a direct correlation to a drop in USD. There is a vicious cycle occurring –

1. Adoption of Bitcoin becomes more widespread
2. Dollar drops
3. Higher stock prices

Of all the things that have survived since the beginning of man, money, religion, and family are staples. Therefore, I also believe home prices will continue to skyrocket around the world forever as I can’t see a way we lose more people than we gain in any future year. That’s a more difficult prediction.

Finally, productive assets are about to be priced to yield nothing. All of them. Very unlikely that bonds will ever yield anything.

While this memo is different from what I’ve written in the past, I feel that it is more honest than anything I’ve ever written. Discussing the nuances of day to day life is insignificant, which is what talking heads do.

As crazy as it sounds, God bless 2020. Being locked down required me to read 18 books I never would have, including a textbook on Art History. There will be incredible innovation and thoughtfulness to come out of this year, which means mankind will definitely advance. 2020 was the greatest thing to happen to mankind.

Happy holidays.